Treasury 'unaware' of tax write-off

Margaret Hodge believes the Whole of Government Accounts do not give a full picture of the UK's financial position

The Treasury was "surprised" to learn that £10.9 billion of unpaid tax had been written off by HM Revenue & Customs in one year, according to an influential group of MPs.

The department was apparently not fully aware of the estimate until after it appeared in the Whole of Government Accounts (WGA) for 2009-10.

It also had "no knowledge" of whether plans were in place to cut the taxpayer's huge £15.7 billion liability for clinical negligence claims, the Public Accounts Committee (PAC) said.

The criticism came in a report on the accounts - which were compiled and published for the first time last year.

The cross-party MPs welcomed the potential of the WGA for helping the Government identify the "risks it needs to manage".

But officials' evidence had suggested their understanding of some aspects was "poor". "For instance the Treasury showed surprise at the estimated £10.9 billion in outstanding tax and it had no knowledge of recent trends in clinical negligence claims or whether plans were in place to reduce the estimated £15.7 billion cost to taxpayers of meeting these claims," the MPs said.

The report added: "We were surprised to find that Treasury did not have a grip on trends in some key areas of risk or plans for managing them."

The committee complained that it had taken the Government 20 months to prepare the accounts - twice as long as in other countries such as France and the US. PAC chair Margaret Hodge said the document also "currently falls short of giving a true and fair view of the UK's financial position".

The Treasury said the WGA represented "the most ambitious public sector account prepared anywhere in the world" and that it was working hard to remove the qualifications. "No other country has sought to fully consolidate all public sector bodies, including the local government sector, in one statement of accounts. We will build on this first publication and are working hard to remove any qualifications," a spokesman said. "HMRC collects almost all tax debt and write-offs are relatively low. What's more, around 90% of those write-offs are due to insolvency where further debt pursuit is actually barred by law."

The spokesman added that the Government had for the first time published a clear assessment of PFI liabilities and launched a review which would "mean the end of PFI as we know it".